ITO, Trichy v. Smt. A.Jayalakshmi, Trichy

ITA 648/CHNY/2011 | 2006-2007
Pronouncement Date: 20-07-2011 | Result: Allowed

Appeal Details

RSA Number 64821714 RSA 2011
Assessee PAN AAHPJ6638G
Bench Chennai
Appeal Number ITA 648/CHNY/2011
Duration Of Justice 3 month(s) 9 day(s)
Appellant ITO, Trichy
Respondent Smt. A.Jayalakshmi, Trichy
Appeal Type Income Tax Appeal
Pronouncement Date 20-07-2011
Appeal Filed By Department
Order Result Allowed
Bench Allotted C
Tribunal Order Date 20-07-2011
Assessment Year 2006-2007
Appeal Filed On 11-04-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER I.T.A.NOS. 644 TO 648 /MDS/2011 ASSESSMENT YEARS : 2002-03 TO 2006-07 THE INCOME-TAX OFFICER WARD-III(1) TIRUCHIRAPPALLI - 620 018. VS. SMT. A. JAYALAKSHMI NO.15 4 TH FLOOR MAHAVIR RESIDENCY 10-B WEST CROSS THILLAI NAGAR TIRUCHIRAPPALLI 620 018. PAN AAHPJ 6638 G (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.P.GOPAKUMAR JCIT RESPONDENT BY : NONE O R D E R PER DR. O.K. NARAYANAN VICE-PRESIDENT THIS IS A BUNCH OF FIVE APPEALS. ALL THE APPEALS A RE FILED BY THE REVENUE. WE ARE CONCERNED WITH THE ASSESSMENT Y EARS 2002-03 2003-04 2004-05 2005-06 AND 2006-07.THES E APPEALS ARE DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME- TAX (APPEALS) AT TIRUCHIRAPALLY DATED 11.1.2011 AND ARISE OUT OF ITA 644 TO 648/11 :- 2 -: THE ASSESSMENT ORDERS PASSED UNDER SEC.143(3) READ WITH SEC.147 OF THE INCOME-TAX ACT 1961. 2. THE ASSESSEE IN THE PRESENT CASE IS RUNNING A P ROPRIETORY BUSINESS UNDER THE NAME AND STYLE OF M/S. ROYAL TEL ECOM PRIVATE EXCHANGE. SHE PROVIDES TELECOMMUNICATION SERVICES TO HER SUBSCRIBERS WITHIN A LIMITED RADIUS OF 500 METERS. IN COMPUTING HER TOTAL INCOME FOR ALL THESE ASSESSMENT YEARS UND ER APPEAL THE ASSESSEE CLAIMED THE BENEFIT OF DEDUCTION UNDER SEC .80IA(4)(II) OF THE INCOME-TAX ACT 1961. SEC.80IA PROVIDES FOR DE DUCTIONS IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERT AKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTURE DEVELOPMENT ETC. 3. SUB-SEC.(4) OF SEC.80IA PROVIDES THAT THIS BENEF IT OF DEDUCTION IS AVAILABLE TO ANY ENTERPRISE CARRYING O N THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING OR DEVEL OPING OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY. CLAUSE (II) OF SUB-SEC.(4) OF SEC.80IA EXTENDS THIS BENEFIT OF DED UCTION TO AN UNDERTAKING WHICH HAS STARTED OR STARTS PROVIDING TELECOMMUNICATION SERVICES WHETHER BASIC OR CELLUL AR INCLUDING RADIO PAGING DOMESTIC SATELLITE SERVICES NET WORK OF TRUNKING BROADBAND NETWORK AND INTERNET SERVICES. ITA 644 TO 648/11 :- 3 -: 4. THE ASSESSEE IS RUNNING A PRIVATE TELEPHONE EXCH ANGE ON THE BASIS OF AN AGREEMENT ENTERED INTO WITH BSNL. BSNL HAS AGREED TO PROVIDE THE ASSESSEE THE TELEPHONE FACIL ITY FROM ITS MAIN DISTRIBUTION FRAME (MDF). IT IS IN THE ABOVE FACTS AND THE LAW STATED UNDER SEC.80IA THAT THE ASSESSEE HAS CL AIMED DEDUCTION UNDER SEC.80IA(4)(II). 5. BUT THE ASSESSING AUTHORITY WAS NOT CONVINCED AB OUT THE ELIGIBILITY OF THE ASSESSEE TO CLAIM SUCH A DEDUCTI ON. HE FOUND THAT THE ASSESSEE HERSELF HAS NOT DEVELOPED ANY TELECOMMUNICATION SERVICE SYSTEM OR AS SUCH SHE IS NOT OPERATING AND MAINTAINING ANY SYSTEM INDEPENDENTLY. HE OBSER VED THAT THE ASSESSEE IS RUNNING THE BUSINESS AS A FRANCHISEE OF BSNL. FURTHER THE ASSESSING OFFICER HELD THAT IN ORDER T O GET EXEMPTION AS PROVIDED UNDER SEC.80IA IT IS NECESSARY FOR THE ASSESSEE TO OBTAIN LICENSE FROM THE DEPARTMENT OF TELECOMMUNICA TION (DOT) GOVERNMENT OF INDIA OR FROM THE TELECOMMUNICATION R EGULATORY AUTHORITY OF INDIA (TRAI) ON THE BASIS OF A WRITTEN AGREEMENT WHICH THE ASSESSEE HAS NOT OBTAINED. IN THE ABOVE CIRCUMSTANCES THE ASSESSING AUTHORITY HELD THAT TH E EASSESSEE IS NOT ELIGIBLE FOR DEDUCTION PROVIDED UNDER SEC.80IA( 4)(II). ITA 644 TO 648/11 :- 4 -: 6. IN FIRST APPEAL THE COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT THE ASSESSEE IS PROVIDING TELECOMMUNICATI ON SERVICES ENVISAGED IN SEC.80IA(4)(II). SHE ALSO OBSERVED TH AT THERE IS NO EXPRESS BAR IN THE PROVISIONS OF SEC.80IA(4)(II) TO DENY THE DEDUCTION TO A FRANCHISEE OF BSNL. SHE ALSO FOUND THAT THE PROVISIONS HAVE BEEN INTRODUCED TO PROMOTE TELE-DEN SITY IN THE COUNTRY AND THE DEDUCTION HAS BEEN GIVEN AS INCENTI VE AND THEREFORE THE PARAMETERS OF THE DEDUCTION SHOULD B E CONSTRUED IN A LIBERAL MANNER. SHE FURTHER OBSERVED THAT EVEN T HOUGH THE ASSESSEE IS CONNECTED THROUGH THE MDF OF BSNL AND S HE IS OPERATING ONLY ON A MICRO LEVEL HER SUBSCRIBERS HA VE ACCESS TO ANY PART OF THE WORLD AND THEREFORE THE RANGE OF T HE SERVICES RENDERED BY THE ASSESSEE CANNOT BE UNDERSTATED. O N THE BASIS OF THE ABOVE FINDINGS THE COMMISSIONER OF INCOME-T AX (APPEALS) ACCEPTED THE ARGUMENTS OF THE ASSESSEE AND HELD THA T THE ASSESSEE IS ENTITLED FOR BENEFIT PROVIDED IN SEC.80 IA(4)(II). SHE DIRECTED THE ASSESSING AUTHORITY TO GIVE THE BENEFI T AS CLAIMED FOR BY THE ASSESSEE. 7. THE REVENUE IS AGGRIEVED AND THEREFORE THESE A PPEALS BEFORE US. ITA 644 TO 648/11 :- 5 -: 8. THE CONTENTIONS RAISED IN ALL THE APPEALS BEING COMMON THE GROUNDS AGITATED FOR THE ASSESSMENT YEAR 2002-03 AR E EXTRACTED BELOW SO AS TO UNDERSTAND THE GRIEVANCES RAISED BY THE REVENUE: 2. THE C.I.T.(APPEALS) ERRED IN APPRECIATING THA T TELECOMMUNICATIONS SERVICES WHICH WERE PROVIDED EXCLUSIVELY BY THE CENTRAL GOVERNMENT WERE PERMITTE D TO THE PRIVATE PLAYERS IN ACCORDANCE WITH THE TELECOMMUNICATION POLICY OF 1994 AMENDED FROM TIME TO TIME. THE TELECOMMUNICATION SERVICE PROVIDER WA S REQUIRED TO OBTAIN A LICENSE FROM THE CENTRAL GOVERNMENT. NO ONE COULD PROVIDE TELECOMMUNICATION SERVICES WITHOUT OBTAINING THE LICENSE FROM THE CENTRAL GOVERNMENT. 3. THE C.I.T.(APPEALS) ERRED IN TREATING THE ASSESSEE WHICH WAS ONLY A FRANCHISEE OF BSNL AS A TELECOMMUNICATION SERVICE PROVIDER EVEN THOUGH SHE DID NOT HAVE ANY LICENSE FROM THE CENTRAL GOVERNMEN T. THE CLAUSE (II) OF SUB-SECTION (4) OF SECTION 80IA CLEARLY REFERS TO ONLY SUCH TELEPHONE SERVICE PROVIDERS WHI CH ARE ENGAGED IN PROVIDING BASIC OR CELLULAR SERVICES ITA 644 TO 648/11 :- 6 -: INCLUDING RADIO PAGING DOMESTIC SATELLITE SERVICES NETWORK OF TRUNKING BROADBAND AND NET WORK AND INTERNET SERVICES. 4. THE CIT(APPEALS) FAILED TO APPRECIATE THAT THIS CLAUSE (II) OF SUBS-SECTION (4) OF SECTION 80IA DOE S NOT ENVISAGE IN ITS AMBIT ANY FRANCHISEE OF THIS SERVIC E PROVIDER. THE C.I.T.(APPEALS) ERRED IN EXTENDING T HE BENEFIT OF DEDUCTION TO A FRANCHISEE OF A SERVICE PROVIDER BY LIBERALLY INTERPRETING THE PROVISIONS O F SECTION 80IA(4)(II). 5. THE C.I.T.(APPEALS) FAILED TO APPRECIATE THAT PRINCIPLES OF BENEFICIAL INTERPRETATION IN FAVOUR O F ASSESSEE SHOULD BE RESORTED TO ONLY WHEN TRUE SCOPE OF THE AMBIT OF THE PROVISION IS NOT CLEAR OR THERE ARE TWO EQUALLY REASONABLE INTERPRETATIONS OR WHEN WORD S OF THE STATUTE ARE NOT PLAIN PRECISE AND UNAMBIGUO US. 6. THE C.I.T.(APPEALS) ERRED IN NOT FOLLOWING THE RATIO OF I) KOTA MARKETING SOCIETY LTD. VS. CIT (RA J) 207 ITR 608 II) CIT VS ORISSA STATE WAREHOUSING CORPORATION (ORI) 201 ITR 729 (III) RENUKA DATTA VS CIT (AP) 240 ITR 463 (IV) NOVAPAN INDIA LTD VS ITA 644 TO 648/11 :- 7 -: COMMISSIONER OF CENTRAL EXCISE 1994 (73) E.L.T 729 (SC) WHICH LAY DOWN THAT PROVISION GRANTING DEDUCTION/EXEMPTION SHOULD BE CONSTRUED STRICTLY. 7. THE C.I.T.(APPEALS) ERRED IN NOT FOLLOWING THE SETTLED PROPOSITION OF LAW [SESHAYEE PAPER BOARDS ( P) LTD VS DCIT 292 ITR 165 (MAD); IPCA LABORATORY LTD VS DCIT 266 ITR 521 (SC)] THAT WHERE THERE IS NO AMBIGUITY IN THE PROVISIONS OF THE STATUTE THE PROVISIONS CANNOT BE INTERPRETED TO CONFER BENEFITS ON THE ASSESSEE. 9. WHEN THESE MATTERS WERE CALLED ON FOR HEARING N OBODY WAS PRESENT FOR THE RESPONDENT-ASSESSEE IN SPITE OF NOT ICE. SHRI K.P.GOPAKUMAR THE LEARNED JOINT COMMISSIONER OF IN COME-TAX APPEARED FOR THE REVENUE AND ARGUED THE CASE AT LE NGTH. WE PROCEED TO DISPOSE OF THESE APPEALS EX PARTE QUA T HE ASSESSEE. 10. SEC.80IA PROVIDES FOR DEDUCTION IN RESPECT OF P ROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OR ENTERPRISES E NGAGED IN INFRASTRUCTURE DEVELOPMENT. THEREFORE IT IS VERY IMPORTANT AS MANDATED BY THE STATUTE THAT THE ASSESSEE WHO CLAIM S DEDUCTION SHOULD BE ENGAGED IN INFRASTRUCTURE DEVELOPMENT. T HEREFORE THE ITA 644 TO 648/11 :- 8 -: QUESTION TO BE CONSIDERED IS WHETHER THE RUNNING OF A PRIVATE TELEPHONE EXCHANGE CARRIED ON BY THE ASSESSEE AMOUN TS TO DEVELOPMENT OF INFRASTRUCTURE OR NOT. CLAUSE (II) OF SUBS-SEC.(4) OF SEC.80IA HAS INCLUDED PROVIDING OF TELECOMMUNICA TION SERVICES ALSO AS AN INFRASTRUCTURE. BUT THE CRUCIAL QUESTIO N IS WHETHER THE TELECOMMUNICATION SERVICES RENDERED BY THE ASSESSEE ARE DEVELOPED AS INFRASTRUCTURE OR NOT. THE ASSESSEE I S RUNNING A PRIVATE EXCHANGE AS A FRANCHISEE OF BSNL. THE MDF IS PROVIDED BY BSNL. THE MDF IS THE LOWEST PHYSICAL FRAME OF P ROVIDING TELECOMMUNICATION SERVICES IN THE SAID INDUSTRY. E VEN THAT LOWEST TECHNICAL FACILITY IS PROVIDED BY BSNL. THE ASSESS EE STARTS HER BUSINESS FROM THE POINT SUBSEQUENT TO THE MDF AND A RRANGES TO GET THE LINES TO HER SUBSCRIBERS THROUGH THE MDF PR OVIDED BY BSNL. THAT IS WHY BSNL HAS ENTERED INTO AN ARRANGE MENT WITH THE ASSESSEE AS A FRANCHISEE. IN FACT THE INFRAST RUCTURE IN THE FORM OF TELECOMMUNICATION SERVICE HAS BEEN DEVELOPE D SO ALSO OPERATING AND MAINTAINING BY BSNL. 11. WHAT IS IN FACT THE ROLE OF THE ASSESSEE. THE ASSESSEE IS AN UNDERTAKING ONLY. A PART OF THE COMMERCIAL FUNCTIO N IS LEASED OUT BY BSNL TO A WILLING ENTREPRENEUR ON FRANCHISEE AG REEMENT. THE ITA 644 TO 648/11 :- 9 -: ASSESSEE IS IN FACT CARRYING ON PURELY COMMERCIAL FUNCTION AND NOTHING TO DO WITH THE DEVELOPMENT OF INFRASTRUCTUR E. THE ASSESSEE HAS NOT OBTAINED ANY LICENSE TO DEVELOP OR OPERATE OR MAINTAIN ANY INDEPENDENT SYSTEM OF TELECOMMUNICATIO N SERVICES FROM THE COMPETENT AUTHORITIES. THE FUNCTIONAL STA TUS OF THE ASSESSEE IS THAT OF AN OPERATING AGENT OF BSNL IN I TS COMMERCIAL FUNCTIONS. 12. THEREFORE IN THE FACTS AND CIRCUMSTANCES OF T HE CASE WE FIND THAT THE ASSESSING AUTHORITY HAS RIGHTLY REJEC TED THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SEC.80IA(4)(II). THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ALLOWED TH E CONTENTIONS OF THE ASSESSEE NOT EXACTLY ON THE BASI S OF THE STATUTORY PROVISIONS BUT ON THE BASIS OF GENERAL OB SERVATIONS. IF THE ASSESSEE CAN BE GIVEN EXEMPTION UNDER SEC.80IA( 4)(II) AS AN ENTREPRENEUR ENGAGED IN INFRASTRUCTURE DEVELOPMENT THEN A PERSON RUNNING EVEN A PUBLIC CALL OFFICE (PCO) SHOU LD BE ENTITLED FOR THE SAME DEDUCTION. THIS LIBERAL VIEW IS FAR F ETCHED AND DEFEATS THE INTENDED PURPOSE OF LAW ITSELF. ITA 644 TO 648/11 :- 10 - : 13. IN THE FACTS AND CIRCUMSTANCES OF THE CASE WE VACATE THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND RESTORE THE ORDERS OF THE ASSESSING AUTHORITY REJECTING THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SEC.80IA(4)(II). 14. IN RESULT THESE APPEALS FILED BY THE REVENUE A RE ALLOWED. ORDERS PRONOUNCED ON WEDNESDAY THE 20 TH DAY OF JULY 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI DATED THE 20 TH JULY 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR